[Click e-Stock] "HK Innoen: Profitability Up on New Drug Entry into US and COVID-19 Vaccine Contracts"

Target Price Raised

On July 18, Shin Young Securities maintained its 'Buy' investment rating on HK Innoen and raised its target price to 61,000 won, citing growing expectations for the company's growth due to the prospect of its flagship products entering the US market and new COVID-19 vaccine supply contracts.

Jung Yookyung, a researcher at Shin Young Securities, commented on HK Innoen's second-quarter performance, stating, "Sales are projected at 258.5 billion won, up 17.9% year-on-year, while operating profit is expected to reach 21.1 billion won (operating margin of 8.2%), down 13.3%, slightly missing consensus estimates." She explained that while the ETC (ethical drugs) division is expected to continue its growth trend with sales of 240.4 billion won, up 24.0%, the H&B division is likely to show weak results, with sales of 18.1 billion won, down 29.0% year-on-year, due to a recall caused by quality issues at the beverage manufacturing plant for products such as Hutgae-soo.

Jung noted, "Despite increased competition, K-Cab has maintained stable growth with prescription sales of 53.4 billion won, and royalty income is also expected to rise thanks to strong sales in China." She added, "Double-digit sales growth in the infusion division and robust anticancer drug sales are driving ETC revenue growth."

Jung further stated, "As early as the end of the third quarter, K-Cab is expected to file for US approval through its American partner, Sebela. Depending on progress, negotiations for European licensing rights are also expected to enter the final stage." She continued, "Additionally, the company recently secured a COVID-19 vaccine (Pfizer Comirnaty) distribution contract worth 213.9 billion won from the Korea Disease Control and Prevention Agency, which should help supplement the H&B division's performance." She projected that, since 95% of the contracted COVID-19 vaccines must be supplied by November, an additional 203.8 billion won in sales growth is possible this year. She also analyzed, "If beverage division supply normalizes and Condition sales recover in the fourth quarter, annual sales in 2025 are likely to comfortably exceed 1 trillion won."

For the full year 2025, Jung forecast sales of 1.1829 trillion won, up 31.9% year-on-year, and operating profit of 113.3 billion won. She said, "HK Innoen is not exposed to the three major US policy risks (drug price cuts, tariffs, reshoring), and the visibility of its flagship products entering the US market makes it highly attractive for investment." She added, "As the medical community strike has entered a recovery phase, further growth in key businesses such as infusions is also expected."